laaS

January 14, 2009

It's really difficult to be objective about XaaS when it seems that no matter what technical argument you can make against it is ultimately trumped by cost. Yet, look at the success of companies like NetSuite and Salesforce.com; how can you argue against the model with so many customers reaping value?

It's probably unfair to lump all "as-a-Service" offerings together
in this way given that each has pros and cons that are distinct. But, I've discussed the concept of business having a Neanderthal brain, and XaaS is a great example of that brain at work. Great technical positions regarding trust, data ownership, availability issues are responded to with the equivalent of "I'm rubber, you're glue, anything you say bounces off of me and sticks to you!" Even worse is the vendors playing the parental role in this childish repertoire scolding the technologists for even raising these issues; admonishing them for restraining progress and being blind to the eventuality of life in the cloud. The hard-sell, if ever I've heard one.

The good news is that none of the technical arguments cannot be overcome. Indeed, most of them can be handled through service-level agreements, legal contracts and the rise of domain-specific XaaS environments. Still, I believe, the ardent pushback to raising technical issues stems from the fact that XaaS providers have yet to solidify the business models underlying XaaS and fear rejections at this point that may shut off avenues of funding before they even get a chance to figure out how to deliver value and protect the consumer all at a reasonable cost factor that still delivers profitability.

In this CNet piece, "The cost of cloud adoption", the author does a great job of explaining the misconceptions regarding the underlying accounting principles of XaaS, without losing the value for business or the impact of running a large data center. But, this blog posting applies primarily to IaaS (Infrastructure) more than PaaS (Platform) or SaaS (Software). However, buying compute time is not a new concept. It used to be the only way businesses could afford to own a computer. Now, it's a realization that the cost of running a data center for even slightly above average utilization is not cost-effective. Moreover, the ability to scale on demand is very useful in shops that see spikes related to specific business-oriented milestones, e.g. end of month reporting.

So, where's the catch? Personally, I practically live out in the cloud now. I can set up shop at pretty much any computer and get to my email, feeds (e.g. RSS, Twitter, etc.), social networks, instant messaging and business documents. With the exception of my business documents, which are hosted by my company, I realize that I don't pay anything for all the other services; they are supported primarily by advertising revenue or venture funding. In a recent dialogue with another analyst we both admitted, if these companies needed to charge to survive, would we pay for these services? Both of us admitted we would not. I suppose that means that I would revert to using desktop client applications and Microsoft Outlook as the primary means of communication. Sadly, if this did occur, I believe many recently rekindled friendships on Facebook would once again dissipate; collateral damage of a bad economy.

While there is a major difference between my personal life in the clouds and business in the cloud, I do believe the one attribute they share is the response to failure by XaaS providers ability to thrive. As I would be returned to using traditional desktop-oriented applications that I pay for once versus pay-by-use or pay-by-subscription, so would organizations that have made bets on the cloud be returned to alternative means of delivering IT functions. This does not have to be devastating, but it certainly can be disruptive and, for some, terminal. While fiscal responsibility is important to the lifeblood of business, betting on XaaS to save money now may mean paying more money in the future as you need to be rescued from a failing platform.

As my Uncle Louie liked to say, "There's no such thing as a free lunch ... unless you pull it out of the garbage can." ;-)